Redundancy pay

How much redundancy pay you get depends on your wage, how long you have worked at the company and your age. When your employer gives you your redundancy payment they must also give you a statement showing how it was calculated.

About redundancy pay

You have the right to a statutory redundancy payment if you are an employee who has worked continuously for your employer for at least two years and you are being made redundant.

Statutory redundancy pay is also due when a fixed-term contract of two years or more expires and is not renewed because of redundancy.

You do not have to claim statutory redundancy pay from your employer, they should automatically pay it to you.

If you're not sure if you're classed as an employee, it's a good idea to check your employment status and talk to your employer.

Alternative work

A redundancy payment isn't due to you if work picks up and your employer offers to keep you on, or offers you suitable alternative work which you refuse without good reason.

If you leave your job for a new one before the end of your notice period, your payment might also be affected.

Temporary lay off

Redundancy pay can be claimed from your employer if you have been temporarily laid off for more than four weeks in a row, or six weeks in a 13-week period.

You must make your claim in writing to your employer who may refuse to pay if they believe normal working is likely to resume within four weeks.

Notice pay

As well as a redundancy payment, your employer should give you proper notice of termination of employment (or pay in lieu of notice). Details of the notice period will be in your contract.

Contractual redundancy pay

You should check your employment contract for how much redundancy pay you are entitled to.

Your employer may offer a more generous package than the statutory minimum as part of your employment benefits.

Your employer cannot offer you less than the statutory minimum through your employment contract.

Statutory redundancy pay

Statutory redundancy pay is based on a calculation which uses your age and length of service.

The redundancy pay calculator can tell you how much statutory redundancy pay you might be entitled to.

Time spent furloughed with a reduced wage will not affect your redundancy payment. The total amount you should be paid will be based on:

  • your age
  • how long you've been continuously employed
  • weekly pay

Your age

  • 21 and under - 0.5 week's pay for each full year of service
  • 22 to 40 - one week's pay for each full year of service
  • 41 and above - 1.5 week's pay for each full year of service

Employment duration

How long you have been continuously employed.

The maximum number of years that can be taken into account is 20 years. You can't be given statutory redundancy pay for more than 20 years' employment.

Weekly pay

This should also include regular overtime and any bonuses or commission. Weekly pay capped at a certain limit (current maximum £560).

Your employer must tell you in writing how your redundancy pay has been worked out. You may get more than the minimum amount the law says you should get ('statutory'), if it's in your contract.

Worked example one - No furlough

45 year old, £600 per week and 15 years full service completed:

Step one

1.5 week's x 4 years service when you were 41 or above = six weeks

Step two

One week x 11 years service when you were under 41 = 11 weeks

Step three

Six weeks + 11 weeks = 17 weeks

Step four

17 weeks x £560 (max weekly wage) = £9,520 redundancy payment

Furlough and redundancy pay

If you’ve been on 'furlough' (temporary leave) during the coronavirus (COVID-19) pandemic, your full normal pay must be used for the redundancy payment calculation.

For example, if your weekly pay is usually £300 but you received 80 per cent pay while on furlough, your redundancy pay must be your full normal pay of £300 a week.

If your pay varies from week to week, your weekly pay must be worked out by using the 12 weeks leading up to the day you got your redundancy notice.

Employers will already have worked out your average hours and full normal pay when claiming from HMRC's Coronavirus Job Retention Scheme.

When calculating redundancy pay, this ‘normal’ pay figure will be used for any hours you were furloughed.

Add up the total amount of pay during the 12 weeks and divide it by 12 to get your weekly pay.

Worked example two - variable hours

30 year old, £15 per hour and 10 years full service completed:

Step one

Average hours calculated at 30 per week

Step two

Average pre-furloughed salary is £15 x 30 hours = £450 per week

Step three

One week's x eight years’ service when aged 22 to 40 = eight weeks

Step four

0.5 week x two years’ service when aged 21 or under = one week

Step five

Eight weeks + one week = nine weeks

Step six

Nine weeks x £450 = £4,050 redundancy payment

Worked example three – part furloughed 

25 year old, £10 per hour and six years full service completed. Furloughed for 10 of 20 hours per week.

Step one

Average pre-furloughed salary is £10 x 20 hours = £200 per week

Step two

One week's x three years’ service when aged 22 to 40 = three weeks

Step three

0.5 week x three years’ service when aged 21 or under = 1.5 weeks

Step four

Three weeks + 1.5 weeks = 4.5 weeks

Step five

4.5 weeks x £200= £900 redundancy payment

Worked example four – return to work and working additional hours 

35 year old, £10 per hour and five years full service completed. Normally works 30 hours per week and spent five weeks furloughed. Returned to work for three weeks and began working 40 hours per week.

Step one

Average pre-furloughed salary is £10 x 30 hours = £300 per week

Step two

Average post-furloughed salary is £10 x 40 hours = £400 per week (for three weeks)

Step three

Total 12 week salary is (£300 x nine weeks) + (£400 x three weeks) = £3,900

Step four

Average salary is £3,900 ÷ 12 weeks = £325 per week

Step five

One week's x five years’ service when aged 22 to 40 = five weeks

Step six

Five weeks x £325 = £1,625 redundancy payment

Relevant end date for your years of service

The number of weeks' redundancy pay you should receive is calculated up until a set 'relevant date'. It's important to know when this date is so you can work out how many years service you have.

In most instances, this is the date when your employment ends (the last day of your notice period). In some situations this will be different:

  • if your employer gave you a statutory notice period up until a set date, and then changed your notice period to finish earlier - the relevant date will be the original end date
  • if you’re on a trial period for another position within the company and your employer lets you go because the work is not suitable - the relevant date is when your original contract ended before the trial period with the new position
  • if you don’t have a statutory notice period (for example because of a payment in lieu arrangement) - the relevant date is when your employment contract would have ended

Limits on redundancy pay

There are limits to how much redundancy pay you can get. You can only get it for up to 20 years of work.

This means, for example, that if you've worked for your employer for 22 years you'll only get redundancy pay for 20 of those years.

The maximum weekly amount used to calculate redundancy pay is £560 – even if your wage is more per week.

The maximum statutory redundancy pay you can get in total is £16,800.

You have to claim for any unpaid redundancy within six months of your job ending.

Tax

Redundancy pay under £30,000 is not taxable.

More information on whether elements of the payment, such as pay in lieu of notice, is taxable is available from HM Revenue and Customs.

Pay in lieu of notice is money paid to you by your employer as an alternative to being given your full notice.

If your employer can't pay

If they can't pay because they're insolvent, you might be able to get the money from the government.

Where to get help

If you've been made redundant, your employer will normally pay you either on the last day of your notice period, shortly afterwards, or on your next pay day. Your employer should give you a written statement showing how any payment has been worked out.

If you have doubts about the way your employer has calculated your statutory redundancy pay you can call the Redundancy Payments Freephone Helpline on 080 0585 811.

If your employer does not give you statutory redundancy pay when you are entitled to it, you should write to them asking for payment. If you have an employee representative, such as a trade union official, they may be able to help.

If your employer still refuses to pay you or can’t make the payment you can make an appeal to an Industrial Tribunal. You need to make a claim to the tribunal within six months, or you may lose the right to a payment.

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